Maryland’s Developmental Disabilities Administration failed to seek $3 million in federal reimbursement it was due, and also overpaid care providers $3.6 million, according to a highly critical state audit released Tuesday.

Among 14 findings, the state Office of Legislative Audits said the agency paid contractors for services to dead people, failed to properly monitor clients who lost their Medicaid eligibility, reported inaccurate information about waiting lists to the General Assembly and did not have adequate security for its information systems.

The agency has a $718 million budget and serves 24,000 disabled people around the state.

Families of the disabled and organizations who provide care have been fighting for increased funding in the wake of $29 million in budget cuts this year. Their leaders said it was “disheartening” and “very distressing” to find the department had not sought reimbursement for as much federal money as regulations allowed.

But representatives of The Arc of Maryland and the Maryland Association of Community Services, which represent both providers and their clients, said some of the auditors’ findings were “off base.”

“We would defend the department” on some of the issues, said Cristine Marchand, executive director of the Arc. “I just don’t think that the auditors understand the program well enough.”

DDA agreed to follow most of the recommendations of the auditors to resolve financial problems, at least in part. But the administration also disputed other findings, insisting that the agency had given the legislature all of the information it had requested.

In a relatively rare rebuttal to an agency response, the auditors said they “continue to believe that the comments made in the report are valid.”

An audit of DDA three years ago found that the agency had not sought maximum reimbursement from the federal government, which supplies 40 percent of its budget. By not filing those claims promptly after the audit, the agency lost $3 million in federal matching money, the report said.

The agency responded that because of time limitations, only $1.2 million was reimbursable, and it was able to collect less than half of that.

DDA also disputed the eligibility of other claims for services, but said it “has taken action to further improve the timely submission of claims.”

The $3.6 million overpayment to providers occurred during a five-year, $80 million initiative to improve the pay of professional care givers. However, the agency used some of the money to reimburse expenses other than pay.

Those professionals make $10 to $11 per hour on average, according to Laura Howell, executive director of the Maryland Association of Community Services. She said state employees with similar duties start at $12 an hour plus benefits.

Howell said the providers likely didn’t use the extra money “inappropriately,” but employed it to pay for fuel, utilities and insurance when money was tight.

“You have to keep the lights on,” she said.

The agency currently has 19,000 people on its waiting list for services. Many of them have been there for years, but auditors found that 250 of those people were dead. DDA said it had already begun its own review of the waiting list before the audit, and has “a newly developed database to improve the timeliness and accuracy of reporting to the General Assembly.”

The auditors also found some of the people in the transitioning youth program – for developmentally disabled people who must leave special schools after they turn 21 – were not qualified to participate. DDA pledged to correct that.

While defending the agency on some counts, Marchand and Howell were disappointed about the amount of federal aid left on the table.

“We were very chagrined that the state lost federal money,” Marchand said. “It’s going to be difficult for the families to understand that.”

The unclaimed $3 million was about the size of this year’s cut to respite and support services for about 2,000 families who care for their developmentally disabled children, she said.

“It’s disheartening to see funds lost,” Howell said. However, she is confident that the state is doing the right thing.

“I think the administration is doing everything they can to get federal funds,” she said.

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Maryland Health Secretary Joshua Sharfstein told a town hall meeting in Columbia Tuesday night that the troubled Developmental Disabilities Administration has made significant progress since discovering $34 million in unspent funds last year.
“It looks like we’re in the red” by $4 million or $5 million for the fiscal year that ended June 30, “which is a good thing for this agency,” Sharfstein said, “but we don’t know yet.”